2023Q1 Outlook: Men's clothing performance leads , manufacturing continues to be under pressure On the brand side, after the optimization of the epidemic control policy, clothing retail ushered in a recovery. In terms of sub-sectors, on the one hand, the growth rate of men's clothing in the high-boom track (Biyin, Haggis) is still leading. On the other hand, the restoration of business/wedding scenes also drives the growth rate of Baoxiniao, Heilan and other brands to exceed expectations. , the overall growth of men's clothing is better than that of other categories, the growth rate is weak under the influence of the high base of sports, and the general public continues to be weak. On the manufacturing side, under the pressure of destocking, the weak economy continues. It is expected that under the drag of weak orders and low capacity utilization rate, the Q1 performance of key manufacturing companies will continue to decline by more than double digits. Huali will benefit from the internal forward-looking cost reduction and efficiency increase and Strict management and control is expected to make the profit margin more resilient.
From the point of view of key companies, it is expected that Hailan Home, Biyin Lefen, and Baoxiniao will perform better.
Hailan House: Benefiting from the restoration and catalysis of business and wedding scenes, the main brand is based on the positioning of cost-effective men's clothing, and its performance is significantly better than that of other mass companies. It is expected that retail sales will grow by single digits from January to February, and the speed will increase significantly in March. The overall Q1 is expected to achieve a growth of 10% to 20%. Profit is expected to grow by 20%-30%, driven by positive operating leverage due to improved store efficiency, which is significantly higher than revenue. Biyinlefen: Benefiting from the improvement of the same store driven by the recovery of offline passenger flow and the ramp-up of new stores, it is expected that the retail end will resume rapid growth, and it is expected that: 1) the backlog of business demand during the epidemic will be released in a concentrated manner; 2) the company's high-speed rail and airport The proportion of storefronts is higher than that of peers; 3) The company's performance is better than that of peers due to its continuous and better discount control strategy. It is expected that Q1 revenue and profit will both increase by 20%-30% year-on-year. SAINT ANGELO: On the retail side, it is expected that the company’s Haggis will grow at a high rate from January to February, and the main brand will increase by about 10%. In March, both brands will increase to 30%+. On the income side, Q1 is expected to grow by 10%-20%, which is lower than the retail side. It is expected to be related to the stable franchise delivery business, the relatively stable growth of Baoniao under a high base, and the weaker growth of small brands. On the profit side, considering that Q1 costs are less and the company controls discounts, and the proportion of Haggis and SAINT ANGELO, which have relatively better profitability, is added, the profit is expected to increase by 15% to 25%.
Industry Viewpoint
Branded clothing: The valuation of second-tier leading brands still has room for recovery, and men’s clothing targets with better terminal prosperity are recommended. Since the beginning of this year, the growth rate of clothing brands in the consumer industry is relatively good, and they still have valuation performance. Compared with the historical average valuation, the current valuation level of the textile and clothing industry still has 22% room for recovery. Under the low base from March to Q2, brand retail sales are expected to record a substantial growth month-on-month. Under the catalysis of data, Q2 brands may usher in a small climax within the year. Considering that the current first-line leaders have been repaired to the lower limit of the reasonable valuation range, we will focus on the investment opportunities of men's clothing brands such as Biyin Lefen, SAINT ANGELO, Hailan Home, etc., which continue to outperform their peers and still have room for recovery. At the same time, it is recommended to pay attention Rotary opportunities for high-quality targets such as Luolai Life/Peacebird/Disu. At the same time, we are firmly optimistic about the high prosperity of long-term sports. The quarter-on-quarter acceleration of Q2 turnover is expected to catalyze the valuation restoration. We recommend Xtep International with better turnover growth, Anta Sports with high performance flexibility, and Li Ning with firmer transformation and upgrading.
Textile manufacturing: It is expected that Q3 manufacturing will usher in the inflection point of fundamental repair, focusing on the layout of high-quality manufacturing at the bottom. The destocking pace of overseas brands is basically in line with our previous judgment. After Q3, the inventory value continued to drop. It is expected that the inventory in the next 1-2 quarters is expected to return to relatively normal. Under the relatively cautious retail expectations in the future, the willingness to place orders in Q2 is still weak. But the most pessimistic time has passed, and it is expected that Q3 will usher in a more obvious recovery. Considering that 2024 will be a big year for overseas brands to place orders for repairs after destocking and low base numbers, then the manufacturing valuation and performance will usher in a double increase. Therefore, it is recommended to focus on the left-hand layout opportunities of the current bottom high-quality leaders. Suggested key points Pay attention to the investment opportunities of Huali Group, Shenzhou International, Weixing shares, etc.